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Market weakness takes its toll

2Q23 review: Market weakness takes its toll

• For 2Q23, LX International reported revenue of W3.44tr (-31.5% YoY). Logistics revenue contracted 40.8% YoY on a weak import/export market, and the trading and resource divisions were hit by a depressed coal market. Operating profit came in at W129.2bn (-55.4% YoY), slightly below the consensus (W148.3bn). Logistics operating profit contracted 61.3% YoY, while trading and resource operating profits declined 45.3% and 56.1% YoY, respectively.

Downgrade to Trading Buy but maintain TP of W43,000; watch for near-term volatility

• In 2H23, we expect profits to stabilize at lower levels. While coal prices remain sluggish, we expect logistics market conditions to turn around. Despite a recent rebound, shares of LX International still look attractively valued, trading at a P/E of 4.5x. That said, we believe investors should brace for near-term volatility, given the stock’s recent strong gains and increasing susceptibility to the share price movements of peers.